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New help for UC losers

Details of improvements to Universal Credit that will give additional protection from losses when switching over to UC from the benefits it replaces.

New improvements to protections for people switching to Universal Credit (UC) from the benefits which it replaces were announced last Thursday (7th June 2018).

This came alongside a one off statistical information release from the Department for Work and Pensions (DWP) that gives a sense of the size of the problem for many people living with cancer or other long term health problems.

1. Does Universal Credit affect me?

Universal Credit is in the process of gradually taking over from the six main "working age" means tested benefits, often referred to as the “legacy benefits by DWP. These are :

- Income-related ESA as a top up or main income for people with a cancer diagnosis

- Income Support - similarly for some carers

-Income-based JSA - if fully fit and recovered but needing to look for work

- Housing Benefits to help pay the rent when income is low in work or not

- Child Tax Credit - to help with the costs of children/young people whether in work or not

- Working Tax Credit - whether running on from a period in work before diagnosis to being handy in recovery as you ease back into work.

Almost all new claims for those benefits will be for Universal Credit (UC) instead by December 2018. And everyone on the legacy benefits will switch to Universal Credit by a new end date - again announced last week of March 2023.

Pension Credit continues outside of Universal Credit for those over “pension age” which will be an equalised 65 years by the end of the year. There will though be:

- some knock on effects for the way Pension Credit works in the future, to make up for the loss of Housing Benefit and (grand) Child Tax Credit

- some emerging issues for “mixed age couples” , where one partner is above and one below pension age , whether just for a year or two or a much longer time before your youngster catches up.

One of the early concerns as UC becomes more real in peoples lives are the losses some people could potentially face on switching from a “legacy benefit” over to Universal Credit . How and when you switch makes a big difference as many early switchers living with cancer are finding out.

2. Potential losses from UC having no Severe Disability Premium

Many people living with cancer, might receive extra amounts within Income-related ESA if they are also successful in making a claim for Personal Independence Payment (PIP)

This extra amount - the Severe Disability Premium (SDP) - is worth an extra £64.30 a week in their ESA, on top of the extra income from the PIP itself. Currently some 500,000 people out of the 1.7 million on Income-related ESA receive this premium.

However, if you then switch over to Universal Credit (UC) - which has no equivalent to the SDP or any other adult disability premiums or tax credit elements - you could lose all or much of that amount.

For the majority of ESA claimants who are in the ESA Support Group, there is a partial compensation against UC’s “disability gap” , because UC’s equivalent of the ESA Support Component is higher. This still means a loss of some £42 a week when you switch to UC for the 400,000 people who currently get an SDP within their ESA.

For those in ESA’s other group - Work Related Activity - there is no additional provision, so it’s a straight potential loss of £64.30 for some 100,000 people. In some cases it may be more if other disability premiums are also lost.

Its not all losses though: some 900,000 in the ESA Support Group can’t access the severe disability premium at present. They will gain some £22 a week from the new UC supercharged version of the ESA Support Component.

There are also some 500,000 people over “pension age” getting the equivalent “severe disability addition” within their Pension Credit . They will be largely unaffected , as PC remains outside UC.

“Mixed age couples” have to be a bit more wary. Those already claiming PC will be able to stay with it, but should a couple separate or a new couples form, in the future the lack of Universal Credit disability amounts could be a real problem. The potential losses for such a couple who in future would have to claim UC rather than Pension Credit could be as high as £250 a week in the case of those who both have health issues but operate as a team helping each other. This comes from a perfect storm combination of gaps in UC as regards: disability, pensiomers and carers with health issues.

3. How you switch to UC makes a difference

The losses above are “potential” though. It depends on your particular circumstances, but also as to how you make the switch to UC.

3.1 Natural migrations

At present, the only way to switch to UC is via what the DWP calls a “natural migration”. This is starting to occur more often in the growing number of areas where Full Service UC operates. They happen either because:

- you decide to switch or

- there is a change in your circumstances that would need a new claim under the old "legacy benefits”

And with no new claims allowed for legacy benefits - the occasional exception aside - you have to claim UC instead.

There has been some confusion around what changes mean a switch and some have found themselves on a “natural migration by mistake”.

The big issue with such switches - whether or not you actually needed to make the switch - is that natural migrations come with no Transitional Protection at all: UC “losers” drop down to your new UC rate straightaway, just as UC “winners” get an immediate increase.

3.2 Managed migrations

It will only be from July 2019 onwards that DWP will start to write to people still on one of the legacy benefits about switching over to UC as part of the managed migration to UC that will bring everyone over to UC.

The big difference is that these managed migrations do come with protection: a transitional addition will top up your UC rate to the amount you were receiving under the “legacy benefits”

So in general, if you work out that you lose under the new sums, you are best advised to hang on to your legacy benefits until such time as the DWP are ready to offer transitional protection.

4. The story so far.

So far only just 42,000 people have done the natural migration from ESA to UC in what has been a gentle but accelerating roll out. Unusually it so happens that only a minority have been in the support group, some 14,000; in time they will be the overwhelming majority. Some 3,000 of these - and 1,000 in the Work Related Activity group will have lost their SDP - losing £42.00 or £64.30 each.

There have been some heart rending tales of people with advanced and life limiting cancers losing money they urgently need to at least be free them from financial worries at such difficult times.

Maggie’s Benefit Advisors have been quietly pressing the DWP to see if any way can be found round such losses and working with solicitors Leigh Day.

Where people have been misadvised to make an early switch, UC have sometimes found a way to ignore the UC claim, but otherwise, Court decisions are pending.

5. What changed in June 2018?

The big change for those who are unwell, is that from now on in, if you get a "severe disability premium" within your legacy benefit then you will no longer do a "natural migration" and so will not lose out on a switch to UC. Instead your switchover will be held back until a managed migration allows you to receive transitional protection.

For the 4,000 who have already made an unprotected switch from Income -related ESA to UC and lost out - an extra payment will be made to act as a transitional addition and top up the amount lost. This will be backdated to the day they came over to UC.

6. Other mitigating measures

6.1 Switching from Working Tax Credit

Another group getting some extra help is a small groiup on Working Tax Credit, another useful benefit for people affected by cancer. On the whole, it still true that cuts not made in April and 2016 are ready and should you make an unprotected “natural migration" to UC. Once again, transitional protection would cushion the blow for a managed migration, but natural migrations mean an immediate hit

The biggest change will be for those with savings over £16,000. Tax Credits do not have a savings or capital limit, simply following income tax rules on the income from savings. UC does have a £16,000 limit, so in an unprotected migration you never make it across to UC. You just lose the tax credits altogether.

The new announcement means any savings over £16,000 will o be ignored for twelve months from switchover, after which normal benefit rules apply. So, you will be allowed on to UC but with the general cuts applying and a higher tariff income from those savings, the amount you get may still be rather less than under WTC.

It is not totally clear as to what happens if you switch as part of a managed migration. Whether it continues to be just 12 months grace as it has just become or whether transitional protection might step in to allow ongoing amounts even if entirely made up of transitional addition.

6.2 Changes when transitional protection starts

Looking ahead to managed migration time, some changes have been announced to improve transitional protection when it arrives after July 2019:

- child care costs will not be counted in adding up your transitional addition, so any help you get on moving into work is not taken off your transitional addition

-linked entitlement to TAs - if you come off UC as a result of a short term boost in earnings, but then return to UC as earnings fall again, you still retain that that transitional addition.

7. Does this fix UC’s health and disability problem?

Very welcome though the new provisions around retaining the severe disability premium are they do not remove all the concerns for people affected by cancer switching to UC or staring UC from scratch:

- Less helpful for new claims the new protections will be of great help to those moving from a legacy benefit to UC but will mean nothing to those newly diagnosed and coming to UC for the first time: there will simply be no adult disability amounts for them

- Child disability amounts remain - e.g. for children and young people affected by cancer - but will be more than halved for the majority of recipients overall . Those with cancer are more likely to be spared but not necessarily

- Long term health issues but not unfit for work the merging of disability help with the ESA Support Component does not offer anything to those who have extra disability costs but who do not go anywhere near the sickness for work assessments under the “legacy system: ie. the many people with long term health issues who make contributions as lone parents, carers, volunteers, jobseekers and workers

- Carers with health issues will get a special hit as UC offers only an amount for sickness or an amount for caring, whereas ESA offers both.

- working with long term health issues: The loss of separate disability amounts makes a confused approach for those doing the right thing and seeking to get back to work asap. There is no provision equivalent to ESA “permitted work” or the the next step of Working Tax Credit as a disabled worker. with extra concessions and amounts for those with added disability costs.

There are a number of issues that have emerged for people with health issues in the administrative design and practises of UC, rather than the rates and sums.

UC intends to move away from general excess customer support of the old legacy benefits in favour of fostering more independence and work skills for jobseekers. What may work as tough love for a willing jobseekers may not always work so well as UC comes to terms with a new and what will eventually be its main customer base: the unwell, carers and others.

Some of the gaps are deliberate in the mision to do UC differently others is by omission in the vision of UC as a sort of enhanced, modern JSA. Many problem areas have emerged and some are being addressed. It seems to depend on: how much will it cost? Will it require alterations to the IT and risk delays? Will it fit in with UC’s main mission to do benefits differently.

Progress is being made, but there may be a little while to go before UC emerges as fully suitable and supportive to those dealing with the already strange new world that opens up after receiving a cancer diagnosis.

That is there for further blogs to help get to grips with this now arriving newcomer to the benefits scene. There are a lot of rumours and fears about UC, not helped by problems lying unresolved for too long. However things are slowly getting better and therer are real improvements too .

Claiming UC now will not be as financially precarious, disruptive or chaotic as many will have experienced in earlier days. Real improvements have been made - including last week's announcements.

Please feel free to comment on the linked Conversation here. Please share your thoughts, queries and reactions to these changes or UC in general.

For individual advice please feel free to message me at any time

Useful links:

The ad hoc statistics release around numbers receiving disability premiums are available here